A conservative talk-radio host and a famed boiler-room magnate have been accused of defrauding investors in the former's hedge fund.
The Securities and Exchange Commission has sued George Jarkesy and John Thomas Financial founder Anastasios Belesis. The regulator says the two men misled investors about the funds' independence from John Thomas, with Jarkesy inflating the funds' value and Belesis collecting huge fees.
"Jarkesy disregarded the basic standards to which all fund managers are held," the SEC's Andrew Calamari said. "Not only did he falsify valuations about the value of their holdings, but he bent over backwards to enrich Belesis at the funds' expense."
Belesis and John Thomas, for their parts, "willfully aided, abetted and caused" the hedge funds' malfeasance, the SEC said, accusing Belesis of pushing Jarkesy for more fees in a "profane and belligerent manner." He also pushed Jarkesy, who hosts a political talk show from his Houston base that is heard in there and in five other U.S. cities, to invest in companies he and John Thomas had interests in.
On one occasion, the SEC said, Jarkesy sought to assuage Belesis after the latter had yelled at him, assuring, "We will always try to get you as much as possible, Everytime without exception!"
All told, John Thomas was paid nearly $5 million by Jarkesy's funds, called the John Thomas Bridge and Opportunity funds, which Jaresky told clients invested in micro-cap stocks, bridge loans and life-insurance policies. Among the payments were $488,750 in fees for four bridge loans, on two of which the brokerage did "nearly inconsequential work," the SEC salleges.
Jaresky also lent $1.7 million from the funds to coal company America West Resources, on whose board he served and in which John Thomas had traded. America West filed for bankruptcy last month.
Jarkesy raised $30 million for the two funds with John Thomas' help from 2007 to 2009.
Both Jaresky and Belesis deny the allegations.